What’s the difference between a Fee-only or Fee-based financial advisor? It turns out, the difference is significant.
We’ve talked in past episodes about how the financial industry using confusing language and half-truths; making if hard for real people to make informed decisions. On today’s episode of Friends Talk Financial Planning, we dig into another of these confusing topics: fee-only vs. fee-based.
Listen to Bridget & John discuss how one word makes a huge difference between what the financial advice industry wants you to think these phrases mean and what Wall Street actually means by them.
Fee-only means that a financial advisor is paid only by the client. While that sounds daunting, it minimizes conflict of interest and advice that favors the advisor not the client.
Fee-based means that the financial advisor is paid by the client AND can recommend annuities, insurance, and mutual funds that pay the advisor a commission.
We both talk about how it’s human nature to be interested in getting service for free. Who doesn’t like free! In the case of your finances, you want to clearly understand who and how your advisor is getting paid. Because an advisor typically knows a lot more about their recommendations than you do, you want make sure that they’re not giving you advice that serves them more than you.
You want fee-only.
It turns out that the underlying difference between fee-only and fee-based is that a fee-only advisor is selling you advice. A fee-based advisor is selling you advice, plus recommending you invest in things that pay the fee-based advisor.
To read more about Bridget’s experience, check out this blog post:
For advisors around the US, check out the Alliance of Comprehensive Planners:
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